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The Real Estate Crash and Its Impact on Finding Tenants


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As I’m sure you know, the real estate market has slowed down to a crawl.  Thanks to the emergence of shadow inventory (lagging foreclosures that are just now hitting the market), property prices are down to levels not seen since the early 2000’s.  Right now there are way more sellers than buyers, and industry pundits are predicting that the current glut of houses for sale will take at least 5 years for the economy to absorb.  This means it’s a great time for buying a property.  However, it is not a great time to manage or sell property

The reason it is difficult to sell is obvious.  But if you were smart enough to execute your strategy over a long term investment horizon (10+ years), you can hold off selling your property until the market turns around, which it inevitably will.  What is less obvious is the impact the current market has on managing rentals, specifically finding decent tenants.

Because houses are so cheap right now, coupled with the historically low mortgage interest rates currently permeating the market, anyone with even a marginal income, credit score, and down payment can buy an affordable home.  Thus, many of the decent tenants can now own their own home, leaving you with a lower quality population from which to pluck tenants. 

The net effect is that there are now fewer qualified tenant prospects to choose from.  And since the tenant pool is smaller, the competition for the good ones is fierce.  Therefore you must do everything you can to make your units more appealing to potential tenants.

There are a few simple, inexpensive ways to make any income property more appealing.  Obviously give it a thorough cleaning including shampooing the carpet.  Hang new blinds in the windows (roughly $4.00 a piece at Home Depot), paint if necessary, and clean up the landscaping and lawn if applicable.  And in general, just look for any other things that can be tweaked to improve the overall ambiance of the unit.

So yes, it is definitely challenging to be a landlord right now, and you will have to work a little harder at it until market prices go up again.  But just stick with it.  As long as you have a long term strategy, and spend just a little more time and money to spruce up your vacant units, in the end you will emerge profitably victorious.



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